Don't Expect Wage Growth Soon: Labor Organization

Wage growth remains far below pre-crisis levels and has fallen into the red in developed countries, according to the latest report from the International Labor Organization (ILO).

Global monthly wages adjusted for inflation – known as real average wages –increased by 1.2 percent in 2011,down from 2.1 percent in 2010 and 3 percent in 2007, the Global Wage Report 2012/2011 said, with predictions of no growth for 2012.

Because of its size and strong economic performance, China has buoyed the data - if had it been omitted from the data, global real average wages grew at only 0.2 per cent in 2011.

The biggest changes were seen in Eastern Europe and Central Asia, which went from double-digit pre-crisis growth rates to a hard landing in 2009.

More Labor for Less

The report showed that wages have grown at a slower pace than labor productivity - the value of goods and services produced per person employed - in the majority of developed countries.

Indeed, since 1999, labor productivity has increased more than twice as much as wages, signaling that as employers gain from greater productivity, workers are receiving less for the fruits of their labor. ILO head Guy Ryder said this was not acceptable.

"Where it exists, this trend is undesirable and needs to be reversed," Ryder said. "On a social and political level its clearest interpretation is that workers and their families are not receiving the fair share they deserve."

As global markets await the U.S.' nonfarm payrolls data on Friday, expected to show that "superstorm"Sandy damaged employment growth, subtracting between 25,000 and 75,000 jobs from November's nonfarm payrolls, the report from the ILO shows that as productivity in the U.S. has increased by 85 percent since 1980, wages have increased by 35 percent in comparison.

A Workers' Revolt?

Workers are getting a smaller share of gross domestic product (GDP), as a bigger slice goes to capital income, a trend that has"wide-ranging economic and social implications," the report added.

In 16 developed economies, the average labor share dropped from 75 percent of national income in the mid-1970s to 65 percent in the years just before the economic crisis.

The ILO warned that rising household debt and decreased consumption not only damaged the chances of recovery for struggling economies but that shrinking wages created a risk of widespread social unrest as those with jobs saw that "simply put, more of the national pie has been going to profits, and less to workers."

"It has affected perceptions of what is fair, particularly given the huge payments some company executives have been getting," according to Patrick Belser, a co-author of thereport.